E-stability vis-à-vis determinacy in regime-switching models

Nigel McClung

Journal of Economic Dynamics and Control, 2020, vol. 121, issue C

Abstract: This paper examines E-stability, determinacy, and indeterminacy in a general class of regime-switching models with lagged endogenous variables. Using determinacy conditions from Cho (2016, 2020), our first result extends McCallum (2007) to models with time-varying parameters: the unique mean-square stable equilibrium is E-stable if agents have current information and one-period-ahead decision rules. Further, we address the existence of E-stable non-fundamental equilibria, and find that Iteratively E-stable equilibria of indeterminate switching models can exist. Finally, we show that indeterminate New Keynesian models with persistent, recurring interest rate peg regimes admit Iteratively E-stable equilibria. In special cases, the Iterative E-stability condition coincides with the Long Run Taylor Principle.

Keywords: Markov-switching; Determinacy; E-stability; Adaptive Learning (search for similar items in EconPapers)
JEL-codes: C62 D83 D84 E42 E52 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165188920301809
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:121:y:2020:i:c:s0165188920301809

DOI: 10.1016/j.jedc.2020.104012

Access Statistics for this article

Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

More articles in Journal of Economic Dynamics and Control from Elsevier
Bibliographic data for series maintained by Catherine Liu ().